lululemon athletica Earnings: An Early Look

Earnings season is winding down, with most companies already having reported their quarterly results. But there are still some companies left to report, and lululemon athletica (NASDAQ: LULU) is about to release its quarterly earnings. The key to making smart investment decisions with stocks releasing their quarterly reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Lululemon has been one of the most successful new stories in retail in the past few years, coming from nowhere to dominate the yoga-apparel niche and expand its presence throughout the activewear segment. But investors are on edge, as a high valuation raises the specter that anything short of stellar performance could lead to a big share-price plunge. Let's take an early look at what's been happening with lululemon athletica over the past quarter and what we're likely to see in its quarterly report on Thursday.

Stats on lululemon athletica

Analyst EPS Estimate

$0.74

Change From Year-Ago EPS

45%

Revenue Estimate

$482.8 million

Change From Year-Ago Revenue

30%

Earnings Beats in Past 4 Quarters

4

Source: Yahoo! Finance.

Will lululemon athletica stay stylish this quarter?Over the past few months, analysts have been relatively optimistic about lululemon athletica's earnings prospects. They kept their calls for the just-ended quarter unchanged, although consensus figures for fiscal 2014 have come down by slightly. The stock, though, has indicated investor concern over the business, having fallen about 12% since mid-December.

Back in January, Lululemon gave some preliminary information about the current quarter that confirmed those worries, with the company projecting that same-store sales growth would fall to the high single-digits in the holiday quarter. Given that comps came in at 26% the year before, even projections of slightly higher earnings per share weren't enough to prevent the stock from falling 6% on the news.

Lululemon's success has also inspired competitors to take direct aim at its yoga niche. Gap (NYSE: GPS) has launched its Athleta brand to go up against Lululemon, boosting its store count by 250% and contributing significantly to Gap's overall recovery during 2012. Meanwhile, sports specialist Nike (NYSE: NKE) has followed Lululemon's model by bring on a yoga ambassador to help with its line of yoga clothes, and Under Armour (NYSE: UA) has come out with its own line of women's workout-wear that adds even more options for discriminating shoppers.

Just yesterday, Lululemon announced more trouble ahead, releasing early guidance for the current quarter. The company said that quality-control issues forced it to recall some of its Luon line of pants and crops because of what it called "a level of sheerness ... that falls short of our very high standards." Although it had expected comps to rise 11%, Lululemon said that because of the incident, it now expected a 5% to 8% increase in same-store sales, with revenue falling $10 million to $20 million the midpoint of its previous range.

In its quarterly report, watch for Lululemon to give more color about the Luon recall and its impact on sales going forward. With the stock highly sensitive to growth disruptions, the incident might well give interested investors a nice buying point -- assuming that the quality-control issues that allowed it to happen don't become a recurring issue.

Find out more about Luluemon by reading our premium research report on the stock. Inside, our top retail analyst looks at whether Lululemon can fight off its competitors and keep its growth strong. Thousands have already claimed their own premium ticker coverage, and you can gain instant access to your own by clicking here now.

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